Minerals Contract Negotiation · Choosing a Negotiation Venue Multiple Venues Minerals Contract...

SPC-EU Deep Sea Minerals Project

Minerals Contract Negotiation

Negotiation Process and Strategies

Presented by: Mary Louise Vitelli, Esq.

March 13, 2013


General Purpose of Negotiation

To provide an opportunity for the Parties to identify and

finalize how specific issues will be addressed , ensure clarity of mutual understanding, and to secure optimal

benefit from the Minerals Contract.



Optimal Objective of Negotiation

To provide both Parties with a fair deal that balances

both interests and provides predictability but is sufficiently flexible to adopt to reasonably changed

circumstances during the life of the contract for mutual benefit.



Whom Should/Does Conduct the Negotiation


Technical Specialists (Both Parties)

Mining, Tax Lawyers

Mineral Economist

Engineer, Geologist

Environmental

Social responsibility

On behalf of Government

Ministry of Mines Ministry of Finance Ministry of Foreign Affairs State Mine Company Outside advisors

On behalf of Company

Company mgmt (not usually the mine

management)

In-house and outside advisors


Whom Should/Does Conduct the Negotiation Depth of understanding is essential


Participant Potential Pro Potential Con

Government Official “In the loop” Political objectives

Local Government Local “buy-in” Seeking communal identify more than profitable ops

Technocrats Specific technical capacity Narrow focus on specific topics

Unions Mine worker collaboration

Not always same interest as Company

Foreign Experts Experienced expertise, lessons learned

Lack familiarity with local nuances


Choosing a Negotiation Venue


Location Pro Con

Multiple Venues Both Parties in same circumstance

Scheduling, changing participants

Host Country Can promote familiarity Can give Company control; other Party less responsive.

Company Offices Can promote familiarity As above.

Neutral Venue No preferential feeling Lack of familiarity


Illustrative Negotiation Strategies


Strategy Description

Knowledge-based Homework done; good due diligence

Skills-based Emphasis on operational details

Rapid-results approach “Now or never” attitude

Patient-approach “Better safe than sorry” attitude

Defensive-approach “You are lucky to be here” attitude

Combined approach Finding a functional balance


Guiding the Negotiation

1. Draft Minerals Contract terms 2. Existing Codes of Practice 3. Existing legal and regulatory framework in host

country (mining, business, tax, land, environment) 4. Existing policies (social, fiscal, environmental) 5. International standards/practice a. Equator Principles b. Corporate Social Responsibility c. Public-Private Partnerships



Preparation for Negotiation

1. Due diligence is everything – who is the Party? 2. Geo-science data – close technical review 3. Harmonization of laws with contract provisions 4. Past experience/lessons learned 5. National vs. Provincial vs. Local priorities 6. Current and expected market for this mineral 7. Beyond the mine, other development priorities for

Government/company.



Illustrative Minerals Contract Negotiation Process

Step 1 Government prepares model contract and ancillary contracts Step 2 Company reviews/comments on contracts Step 3 Parties agree to negotiation schedule Step 4 Formal negotiation minutes/recorded Step 5 If necessary, may suspend; safeguard docs Step 6 Government/Company approvals must be received prior to final signing Step 7 Once formally closed may not reopen



Illustrative Minerals Contract Negotiation Points

1. Export vs. No Export 2. Mining vs. Mining & Processing 3. State Equity vs. No State Equity 4. Premium payments vs. Higher Royalty 5. Payments now vs. Payments later 6. Local procurement vs. Any procurement 7. Public infrastructure vs. Privately financed 8. CDA vs. CSR



Illustrative Minerals Contract Negotiation Points

9. Compliance with EITI vs. General reporting 10. Mineral Resource fund vs. Not Company matter 11. Third party access vs. For cost + profit 12. Right to transfer vs. Transfer tax 13. Use of local law vs. International arb. 14. Environmental Studies vs. Screening reports 15. Social impact assessmt vs. Local authorities role 16. Consultation/media vs. Confidential




Mutual Understanding is Essential....



Minerals Contract Negotiation: what the Company is thinking.....


Minerals Contract Negotiation: .....what Government is thinking!


Always have a Plan B!

Thank you.

[email protected]


Minerals Contract Negotiation · Choosing a Negotiation Venue Multiple Venues Minerals Contract...

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